By Peter Evans

LONDON--British American Tobacco PLC said it expected a difficult year ahead as it posted a big fall in full-year profit.

BAT reported 2014 profit of 3.12 billion pounds ($4.85 billion), compared with GBP3.90 billion in 2013, on revenue that was 8.4% lower at GBP13.97 billion. The company blamed adverse exchange rates for the big drop in revenue.

The maker of Lucky Strike and Dunhill said the volume of cigarettes sold declined 1.4%, compared with a fall of 2.7% a year earlier.

"We expect the trading environment to remain difficult in 2015, and that foreign exchange headwinds will continue to have a significant impact," said Chief Executive Nicandro Durante.

Write to Peter Evans at peter.evans@wsj.com

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